The Regulation of Television Sponsorship

By

Duncan Grehan M.A. LL.B. Solicitor

March 2003

EUROPEAN ADVERTISING LAWYERS' ASSOCIATION

A. INTERNATIONAL REGULATION OF SPONSORSHIP IN EUROPE

1) Statutory Regulation:

a) The Treaty of Rome and the Freedom to provide sponsorship services

b) Directive 89/552 EEC Television without Frontiers Directive TVWF as amended byDIR97/36/EC

c) The Green Paper on Commercial Communications in the Internal Market

d) The follow up to the Green Paper on Commercial Communications within the Internal market.

2) Self-Regulatory:

a) The ICC Code

b) Country Codes of members of the European Advertising Standards Alliance

B. REGULATION AT NATIONAL LEVEL - IRELAND AND THE UK

1) Ireland

a) Statutory Regulation

b) Self-Regulatory Codes

2) The UK

a) Statutory Regulation

b) Self-Regulatory Codes

3) Comparative differences between the Irish and UK provisions

C. CONCLUSION

ANNEXED DOCUMENTS:

1. Council Directive 89/552/EC of 03/10/89

2. Directive 97/36/EC

3. ICC International Code on Sponsorship

4. ICC International Code of Advertising Practice

5. The IRTC / Minister's Code of Standards, Practice and Prohibition in relation to Sponsorship in Broadcasting Services in Ireland

The Regulation of Television Sponsorship

A. INTERNATIONAL REGULATION OF SPONSORSHIP IN EUROPE

1) Statutory Regulation:

There exists a public law system of regulation at the European Union level.

a) The Treaty of Rome and the Freedom to provide sponsorship services

The principle of the free movement, in the Member States of the Union, of television programmes and of all kinds of broadcasting, is established subject to clearly defined legal requirements. Television Sponsorship is a service within the terms of Art 49 (ex Art 59) and Art 50 (ex Art 60) of the Treaty of Rome on the free movement of services within the Community. Member States cannot restrict services emanating from other Member States unless the restrictions come within the permitted exceptions in Art 46 (ex Art 56) and Art 49 (ex Art 59) of the Treaty. Member States can exceptionally restrict the movement of services from other Member States on grounds of:

" public policy, public security, or public health. (Art 46)

" overriding reasons relating to the public interest: these have been identified in the case law as including the protection of workers; the protection of consumers; the protection of intellectual property; the protection of fair trading; the conservation of the national historic and artistic heritage; the widest possible dissemination of knowledge of the artistic and cultural heritage of a country; professional rules designed to protect recipients of services; the protection of pluralism and linguistic policy. (Art 49. Note: such measures must be non-discriminatory)

In all instances the restrictions must be shown to be proportionate to the pursued objectives of the legislature. The European Court has specified the meaning of proportionality:

"it is settled case law that requirements imposed on the providers of services must be appropriate to ensure achievement of the intended aim and must not go beyond that which is necessary in order to achieve that objective" - C-384/93 Alpine Investments BV.

In other words, it must not be possible to obtain the same result by less restrictive rules.

Wherever the application of the principles of free movement enshrined in the Treaty is not sufficient to remove restrictive barriers (e.g. where

national restrictive measures are justified under Community law,) secondary legislation is necessary. The aim of this legislation is to establish an equivalent level of protection of the relevant public interest objectives (e.g. consumer protection, protection of minors, protection of public health ) in order to remove the legal barriers resulting from disparities between national regulations within the European Union. A number of such EU Directives are relevant to broadcast sponsorship. They concern inter alia medicinal products, tobacco and television broadcasts.

b) Directive 89/552 EEC Television without Frontiers Directive TVWF as amended by DIR97/36/EC

The Directive with the greatest effect on television sponsorship is the "Television without Frontiers" [TVWF] Directive (Council Directive 89/552/EECof 03 October 1989 as amended by Directive 97/36 EC of the European parliament and council of 30 June 1997 on the co-ordination of certain provisions laid down by law, regulation or administrative action, in Member States concerning the pursuit of television broadcasting activities.

Its Article 1(C) defines "Sponsorship" as "any contribution made by a public or private undertaking not engaged in television broadcasting activities or in the production of audio-visual works to the financing of television programmes with a view to promoting its name, its trade mark, its image, its activities or its products."

The Directive's primary objective is to create a legal framework which ensures the free movement of broadcast services. Free movement is ensured through the following mechanisms:

" Each broadcaster can only be subject to the law of the Member State under whose jurisdiction it comes (that of the place where it is established) and must comply with a minimum set of common rules.

" Member States must ensure freedom of reception and may not hinder the retransmission of broadcasts from other Member States for reasons that fall within the "co-ordinated fields" identified by the Directive.

However this is qualified by Art 3.1 to the effect that

"Member States must maintain the right to set down more detailed or stricter rules and in certain circumstances to lay down different conditions for broadcasts within their jurisdiction"

In relation to television sponsorship the Television without Frontiers Directive provides at Chapter IV Art 17:

Art 17 Directive 89/552 EEC

"1. Sponsored television programmes shall meet the following requirements:

a) the content and scheduling of sponsored programmes may in no circumstances be influenced by the sponsor in such a way as to affect the responsibility and editorial independence of the broadcaster in respect of the programmes;

b) They must be clearly identified as such by the name and/or logo of the sponsor at the beginning and at the end of the programmes;

c) They must not encourage the purchase or rental of the products or services of the sponsor or the third party, in particular by making special promotional references to those products or services;

2. Television programmes may not be sponsored by natural or legal persons whose principal activity is the manufacture or sale of products, or the provision of services, the advertising of which is prohibited by ART 13 (tobacco products) or 14 ( medicinal products).

3. News and current affairs programmes may not be sponsored."

Art 19: DIR97/36/EC of the amending Directive further provides:

"2. Television programmes may not be sponsored by undertakings whose principal activity is the manufacturer or sale of cigarettes and other tobacco products.

3. Sponsorship of television programmes by undertakings whose activities include the manufacture or sale of medicinal products and medical treatment may promote the name or image of the undertaking but may not promote specific medicinal products or medical treatments available on prescription in the Member State within whose jurisdiction the broadcaster falls."

c) The Green Paper on Commercial Communications in the Internal Market

In November 1992 the European Commission decided to review its future policy in the field of Commercial Communications. This review took the form of a Green Paper published in mid-1996 on commercial communications. The Green Paper highlighted the knock-on effect of Art 3.1 of the TVWF Directive (reserving the right of Member States to maintain stricter rules and different conditions for broadcasts within their own jurisdiction) on trans-border commercial communications business. It

published the results of an EU survey of commercial communications suppliers (advertising agencies etc.) commissioned by the European Commission as part of the background research materials for the Green paper:

" 23% when asked to respond spontaneously about problems in providing trans-border services, placed regulatory problems high on their list of "very serious" barriers.

" 99% identified specific regulatory difficulties.

" 40% noted that the only way to tackle the problem was either to adapt at the local level, or undertake totally different campaigns in each country.

Respondents were unanimous in deciding that of these factors it is far less expensive to conduct a commercial communications campaign across the US than it is in the EU.

As preparation for the Green paper a comprehensive review of the relevant legislation in each Member State was also undertaken. The Green paper found that differing legislation in each country posed a barrier to those wanting to offer commercial communications services across borders.

The Green paper found that restrictions in the sponsorship area were often very detailed and disparity between the Member States was very wide. Aspects of sponsorship tightly controlled (or indeed banned) in some countries were treated as requiring no regulation at all in others. The general opinion was that, although certain measures were necessary, the differing, and sometimes diametrically opposed measures, created enormous problems. For television broadcasting the United Kingdom and Denmark were felt to be unduly restrictive.

d) The follow up to the Green paper on Commercial Communications within the Internal market.

In March 1998 the European Commission published a Communication outlining a series of measures to facilitate the cross-border provision of commercial communications services within the EU "The follow up to the Green paper on commercial Communications within the Internal market". Because of perceived problems in the area it focused in particular on sponsorship and called for the different national regulations relating to sponsorship which are not harmonised by the earlier Directives to be examined. A number of parties noted differences in definitions of sponsorship or even their absence (whereby sponsorship is treated as identical to advertising) for regulatory purposes across the Member States. They complained of the legal uncertainty that arose as a consequence. Likewise certain parties also noted that TV

sponsorship regulations vary significantly between countries. To deal with these perceived problems the Commission proposed the following:

" Setting up a commercial communications Expert Group

" Making available a contact point and information network

" Establishing a database on national and Community regulations and self-regulatory codes in the field.

" Applying a transparent assessment methodology.

What has happened since then is outlined in my concluding remarks.

2) Self-Regulatory

Sponsorship is also subject to industry approved standards at the international level.

a) The ICC Code

The International Chamber of Commerce code on sponsorship, published 24 November 1992, (www.iccwbo.org/home/statemetnts_ rules/rules/1992/sponcod.asp) lays down principles of good sponsorship practice. Its basic principles include the requirement that sponsorship should be honest, truthful and legal, it should be based upon principles of fairness and good faith and it should not be misleading. It requires the avoidance of imitation where it might mislead or would generate confusion. It provides that sponsorship benefits the general public by making possible events and activities which might not otherwise have been feasible. It recommends that the sponsor should have a duty of care to safeguard the artistic, cultural, sporting or other content of the sponsored activity and that it should not abuse its position by damaging the identity, dignity or reputation of the sponsored party. It draws attention to the duty of care on the sponsored party not to obscure, deform, demean or impugn the image or trademark of the sponsor nor to jeopardise its goodwill. In relation to multiple sponsorship, it states that contracts and agreements should clearly set out and inform all other sponsors of the rights, limits and obligations of the sponsor. The ICC code puts the obligation on the sponsored party to inform any possible future sponsors of any sponsors already a party to the sponsorship and the obligation not to accept a new sponsor without the prior approval of existing sponsors. In relation to broadcast sponsorship it underwrites the principle that the sponsor should have no editorial influence on the programme's content or independence. Sponsored television programmes should be identified by the sponsor's name and / or logo at the beginning and / or end of the programme.

b) Country codes of members of the European Advertising Standards Alliance
(www.easa-alliance.org)

There is also a self-regulatory system in every Member State of the European Union and in several of the Central and Eastern European and EFTA countries. At the basis of each system is the general code of advertising practice of the ICC.

B. REGULATION AT NATIONAL LEVEL - IRELAND AND THE UK

1) Ireland

In Ireland sponsorship of television is regulated by statutory law and by self- regulatory codes adopted by the industry.

a) Statutory Regulation

The Broadcasting Act 1990 authorised the Minister for the Arts, Culture and the Gaeltacht to issue a code of standard in advertising, sponsorship and other forms of commercial promotions in broadcast services. The Broadcasting Authority Act of 1960, amended by the Act of 1976 and the 1990 Act, restricts advertising in relation to a range of subject matters including politics and religion and established the Broadcasting Complaints Authority. The Radio and Television Act, 1988 provided for a single independent private television station and established the Independent Radio and Television Commission (IRTC).

b) Self-Regulatory Codes

Parties to any sponsorship arrangement will find that their freedom is limited by industry-wide operated codes of conduct to which they have or ought to have subscribed. These codes themselves are subject to the public law which supersedes them. They aspire to best practice goals and provide for complaint and sanction mechanisms including investigation and publication of findings. Most codes within the industry however provide for a withdrawal from the private investigation process once the parties chose to seek assistance of the courts. It seems likely that the courts would look to the codes' principles for guidance on practice, courses of conduct and industry standards when determining complaints. Codes of relevance to sponsorship arrangements include:

(i) ASAI Codes

The codes on advertising and sale promotion standards published by the Advertising Standards Authority of Ireland

(ASAI) apply also to broadcast advertising. They set the standard with which all forms of commercial communication must comply. Their Principles of Good Sponsorship Practice are derived from the ICC Code.

(ii) The Minister's Broadcasting Code / IRTC Code

On 11 May 1995 a code of standards, practice and prohibitions in advertising sponsorship and other forms of commercial promotion in broadcasting services was published by the Minister for Arts, Culture and the Gaeltacht in consultation with the board of the national television station (RTE) and the Independent Radio and Television Commission(IRTC). The code deals with both broadcast advertising and sponsorship. The code is comprehensive and makes a fundamental distinction between advertising and sponsorship. It imposes considerable restrictions and limitations upon the scope of commercial communication consistent with the statutory and common law and existing industry codes on the national and international stage. Its general terms in relation to television sponsorship mirror Art 17.1. Paras (a) to (c) of the TVWF Directive quoted above:

" The content and scheduling of sponsored programmes may in no circumstances be influenced by the sponsor in such a way as to affect the responsibility and editorial independence of the broadcaster in respect of programmes;

" They must clearly be identified as such by the name and/or logo of the sponsor at the beginning and / or end of the programmes;

" They must not encourage the purchase or rental of the products or services of the sponsor or a third party in particular by making special promotional references to those products or services other that in advertisements in commercial breaks

The second point is further clarified by the Code which goes on to state that in view of the identification requirement, logos would be acceptable as "bumper" credits around advertising breaks during the programme. It bans product placement and the use of current affairs personalities in advertisements, subliminal advertising and the advertising of cigarettes and cigars. It notes the voluntary code whereby spirit-based alcoholic drinks are not advertised on radio and tv. A sponsor

must not be associated with a programme which addresses an audience to which its commercials are not permitted to appeal (e.g. alcoholic drink sponsorship of youth programmes is not permitted) or during which it would not be permitted to advertise. It provides that individuals cannot be exploited commercially without permission and provides for the timing of the insertion of advertisements in programmes. In relation to sponsorship it in effect dictates the perimeters within which radio and tv broadcasting shall operate. It provides for the fundamental principal of the independence and integrity of the programme director and editor and imposes a duty on broadcasters to ensure that editorial integrity is not influenced by sponsorships. It bans sponsorship which constitutes advertising. It limits the copy which can be used in reference to prizes or the supply of goods by a sponsor and bans the use of advertising copy in connection with same on the grounds that it constitutes surreptitious advertising. It bans the sponsorship of news, current affairs and religious programmes. It bans products placed by a sponsor and the display of the sponsor's advertising material in, for example, a studio. Its restrictions are also applicable to programmes made by independent producers and non-broadcasters purchased by broadcasting directors. It prohibits product endorsement by programme presenters.

(iii) The RTE Sponsorship Guidelines

These were drawn up with effect from 1 September 1997, which is subsequent to the Minister's Code of 11 May 1995. Not surprising, therefore, it provides that in all cases of sponsorship, it is of paramount importance that the editorial independence and integrity of the broadcaster are uncompromised. RTE acknowledges its duty to ensure that sponsorship should not prejudice its legal responsibilities nor have any editorial influence over programme broadcasting and that it has a duty to ensure that its compliance with the law is not compromised by sponsorship. RTE acknowledges as a general principle that it sees sponsorship as a means of enhancing an existing programme, or of improving the selection and quality of programmes which may not otherwise have been made and that sponsorship is not intended to replace or reduce revenue from advertising sales. It distinguishes cash sponsorship and sponsorship in the form of products, services or facilities. It provides that product placement is prohibited but that in certain circumstances as in the interest of set dressing and realism (or in the words of the RTE code "for the sake of verisimilitude") branded products and the like may be

permitted provided the programme maker ensures that no unfair commercial advantage will accrue to the goods in question. It restricts the sponsorship of programmes such as news, current affairs, religious programmes, children's, consumer information and magazine programmes. Weather, sports reports and traffic bulletins may be sponsored. Sponsors must have no interest, real or apparent, in the editorial content of the programme. It provides, by way of example that a travel programme may not be sponsored by a tour operator or that a bank may not sponsor a programme on the management of personal finances. Sponsorship will not be accepted from political organisations, the tobacco or pharmaceutical industries. RTE will not accept sponsorship from a manufacturer or supplier or tobacco even if he is dealing in non-tobacco products. It suggests that alcohol and tobacco manufacturers / suppliers will not be acceptable sponsors of sport and music programmes which are likely to attract younger viewers. It has detailed provisions in relation to sponsored events and it emphasises the need to make every reasonable effort to foresee and resolve problems at the pre-production stage. It has here in mind issues concerning logos, trademarks, brands names, the degree of exposure which the sponsor receives, the responsibility, authority and duty of the programme producer and his independence from the sponsor. It regulates beforehand the conditions upon which advertising, signage and branding at an event may be justified and the degree of credit attributable to the sponsor. No sponsored programme or series may include a sponsor's name in its title. Such credit may only be visual but cannot be in sound. Sponsorship must be acknowledged in both the front and the end credits of the programme. This credit may only take one of the following three formats:

"sponsored by"
"in association with"
"supported by"

Any other expressions of credit such as "brought to you by" are not permitted. Duration of the credit is limited to seven seconds at the opening and closing title.

Sponsorship of children's programmes is prohibited.

Independently produced programmes are subject to these RTE sponsorship rules. The sponsorship of independently produced programmes for RTE will only be acceptable provided RTE contracts both directly with the sponsor and separately with the

production company in respect of such sponsorship. Independent producers can only use "format documentation" in respect of such proposed sponsorship with which RTE is satisfied.

2) The United Kingdom

It is here emphasised that my professional qualification limits me to advising on issues of Irish law only. The following is merely an outline of the UK position.

a) Statutory Regulation

The Broadcasting Act 1990 (the 1990 Act) makes it the statutory duty of the Independent Television Commission (ITC), after appropriate consultation, to draw up, and from time to time review, a code governing standards and practice in advertising and in the sponsoring of programmes and prescribing the advertisements and methods of advertising or sponsorship to be prohibited or to be prohibited in particular circumstances. The ITC may make different provisions in the Code for different kinds of licensed services. (A code for text services is published separately) This Code applies to all television programme services licensed by the ITC under the 1990 Act and the subsequent 1997 Broadcasting Act. Compliance with the Code is a condition of an ITC licence and licensees must ensure that relevant employees and programme-makers, including those from whom they commission programmes, understand its contents and significance. The 1990 Act expressly reserves the right of the ITC to specify requirements which go beyond the rules set out in this Code. The ITC may give directions to exclude methods of sponsorship not referred to in the Code.

b) Self-Regulation

The Independent Television Commission (ITC) Code of Advertising Standards and Practices. No sponsorship may breach the principles or spirit of this code.

The ITC Code of Programme sponsorship

The ITC Code of programme sponsorship gives effect in the UK to a number of requirements relating to television sponsorship in the 1989 EC Directive (89/552/EEC) Television without Frontiers as amended by the subsequent 1997 Directive (97/36/EC).

The ITC Code firstly takes steps to clarify issues by providing a definition of television sponsorship. A programme is deemed to be sponsored if any part of its costs of production or transmission is met by an advertiser with

a view to promoting its own or another's name, trademark, image, activities, products or other direct or indirect commercial interest. The Code asserts that one of the main principles governing the regulation of programme sponsorship is maintaining the distinction between advertising and sponsor credits, in order to ensure that credits are not used as a means of extending allowable advertising minutage.

The ITC Code lists the following as being prohibited from programme sponsorship: Political interests, manufacturers of tobacco products and any other product or service which may not be advertised under the ITC Code of Advertising Standards and Practice. It also provides for restrictions to be placed on pharmaceutical products ( inline with DIR 97/36/EC) and betting and gaming companies. Therefore bookmaking companies are not allowed sponsor programmes devoted wholly or in part to the coverage of horse or greyhound racing or the results of such racing and gaming companies may not sponsor television game shows which closely resemble the gaming that takes place in bingo clubs or casinos. No company with betting or gaming interests may sponsor programmes specifically designed for or aimed at children. Programmes may not be sponsored if the programme refers to issues about which there is significant public controversy and in relation to which the sponsor has a direct interest.

Art 17 (a) of the TVWF Directive concerning editorial integrity is dealt with in Rule 10.6 of the ITC programme code dealing with undue prominence. It supports the principle of editorial integrity. It states that "No undue prominence may be given in any programme to a commercial product or service. In particular, any reference to such product or service must be limited to what can clearly be justified by the editorial requirements of the programme itself".

In line with Article 17 (b) of the TVWF Directive the code states that news programmes may not be sponsored. However 6.1 of the Code provides an exception in that specialist news reports (for example, cultural, sports, traffic, travel or weather) presented outside the context of a general news programme may be sponsored. Such sponsored reports must be separated from the news programme in some clearly apparent way, e.g. by programme end credits or a commercial break.

The code contains detailed rules on sponsor credits. Sponsored programmes must have either a front or an end credit or both. The rules are designed to make the sponsor's association with the programme clear to the viewer while not blurring the distinction between programmes and the sponsorship attached to programmes. This section of the Code deals with the points raised in Article 17 (b) TVWF Directive concerning sponsorship credits. While this takes up only two lines in the Directive and three lines in the comparable Irish Industry

code, it takes up two pages of the IRT Code and sets down detailed and stringent restrictions.

Product placement is prohibited by the EC Directive and is therefore illegal in all EU member states. It is defined in the code as "the inclusion of, or reference to, a product or service within the programme in return for payment or other valuable consideration to the programme maker or ITC licensee (or any representative of either)".

3. Comparative differences between the Irish and UK self-regulatory codes:

The following table illustrates some of the discrepancies between television sponsorship on independent television stations in the UK and television sponsorship on independent television stations in Ireland.

C. CONCLUSIONS

It is clear from the above comparison that potential barriers exist between Member States in relation to their regulatory systems for television sponsorship. This problem had been identified at European level in the Commission's Green paper on Commercial Communications in the Internal market (above para A.1.(c)) In the reply to the Green paper specific measures to deal with the perceived problems were proposed. Sponsorship was particularly identified as an area which needed to be dealt with. What steps have to date been taken by the Commission?

" Setting up of an expert group: The expert group was set up in May 1998 and will have its 7th meeting in April 2000. The group is working towards the production of a document which will recommend whether mutual recognition or harmonisation is needed regarding divergent national legislation in the realm of commercial communications. To do so they will need an up-to-date report on the regulatory position in each Member State. The information they currently possess is out of date. As regards sponsorship, there are plans afoot to formulate proposals in relation to product placement. Little else appears to have been accomplished.

" Establishing a database on national and Community Regulations and self-regulatory codes in the field. This has not yet been carried out.

" Making available a contact point and information network This takes the form of the Commercial Communications Website http://europa.eu.int/comm/internal_market/comcom.

" Applying a transparent assessment methodology This area is currently in dispute. The European parliament finds that that the assessment methodology "lacks teeth" to be effective in practice in particular as the Communication fails to make its application mandatory or bound by time limits.

From the above it appears that an analysis of current regulatory provisions at national level in the Member States is needed for comparative purposes before further developments can be made. Sponsorship's importance in the realm of commercial communications is coming to the forefront and its pivotal position has caught the attention of regulators. It has now been recognised that divergence of national implementations of the European legislation in the area may create a barrier to movement of commercial communications services, but until a complete survey of this divergence is in place, regulators at European level are unlikely to be in a position to go about remedying the situation.

Duncan Grehan
March 2000

SCHEDULE OF DOCUMENTS

Attached you will find copies of the documents listed below and referred to in this paper:

1. Council Directive 89/552/EC of 03/10/89

2. Directive 97/36/EC

3. ICC International Code on Sponsorship

4. ICC International Code of Advertising Practice

5. The IRTC / Minister's Code of Standards, Practice and Prohibition in relation to Sponsorship in Broadcasting Services in Ireland